Amazon Finally Launches MP3 Download Store; Pricing Still Wrong

from the about-time dept

It's been rumored for ages, but Amazon has finally launched its MP3 download store, hyping up the fact that it's DRM-free. Amazon had gone back and forth on this idea for a while, at one point apparently considering teaming up with Apple on iTunes, only to later plan to go it alone. At one point, the rumor making the rounds was that Amazon felt it would be too difficult to compete with iTunes and had temporarily scratched plans for an offering. That was until folks at the company realized that the achilles heel for iTunes might be its DRM.

And that brings us today, with Amazon launching a DRM-free mp3 download store. It's definitely a step in the right direction, but it's still got some problems. First, the selection is definitely lacking. While the company has brought together an awful lot of content, there are still many record labels (and bands) that fear DRM free music (ignoring, of course, that most CDs are DRM-free). The second problem is that it missed the chance to shoot at the real achilles heel of iTunes: the pricing model. The songs all cost either $0.99 or $0.89, which is way too expensive in an age where people can carry around iPods with 160 gigs of content. Now that labels are finally coming to terms with the fact that DRM is a dead-end concept, the next big revolution will be in the price of music. So while Amazon got the first part right, the second part is still open for those who now want to attack the achilles heel of both Amazon and Apple.

My suggestion would be to kill two birds with one stone, and change the pricing on full albums. I think a big problem for selling music these days is that with something like iTunes, with its set pricing for both songs and albums, the best way to start shilling full albums would be to give a large discount on them, e.g. charge .50 or .60 per song if you get the full album. That would make the per-song pricing seem less absurd, while also encouraging the average consumer to buy more than just "that one song" they heard on the radio.

No money left in it?

Are you mad? Have you ever been to a concert? Do you know what it costs to get in, to buy a t-shirt or some other form of band memorabillia?

There's rarely EVER been any $$ in music selling CDs.. unless you're an independent artist and can make and distribute the CDs yourself. Most artists, unless they have a VERY GOOD contract, get a small percent (5 - 8%, I think) of a CDs cost to the consumer, (this amounts to .75 cent - $1.20 on a $15 CD).

Rediculous.

As for Amazon's effort it might not be pefect, but I say let them try we need some good options besides iTMS which I refuse to use.

Another Opportunity for Amazon

I had my fingers crossed that the Amazonians had the foresight to utilize one of the benefits of the old MP3.com. That is to take the two or three dozen CDs I've bought from them during the past couple years and automatically make them available to me as mp3s as the legitimate owner of those CDs (since Amazon actually holds those purchase records). Even just giving me streaming access to my own CDs (only purchased via Amazon) would be a step in the right direction - and might actually keep me from going to Newbury Comics instead.

We've seen this hypothetical model you talk about.

Their model was perfect. They let the consumer decide what audio quality they wanted to hear, and had an extremely cheap pricing structure that varied based on what the consumer chose. All DRM-free.

A 'friend' I know that used to have an account there, and he found that the prices they charged for these consistent quality DRM-free downloads were enough incentive to cough up the money instead of turning to file-sharing. In fact, the prices were so right, that they actually created incentive for him to try out MORE music, music he might not have thought twice about purchasing before. Go figure.

I'm tired of this age of "me first". They're in BUSINESS to make MONEY. Until you deliver some actual numbers of their expenses/revenue/profits, you can't give an accurate perspective on their pricing model. I guess that's one thing the Wall Street Journal has on bloggers. They try to adhere to some standard of journalistic integrity rather than spouting opinions without presenting the info to back it up.

Re:

I'm tired of this age of "me first". They're in BUSINESS to make MONEY. Until you deliver some actual numbers of their expenses/revenue/profits, you can't give an accurate perspective on their pricing model.

You seem to have misunderstood what I'm talking about. Of course they're in business to make money. The point is that they've left themselves wide open to NOT being able to make money. You need to understand basic trends of where things are going, and if they leave the door so wide open, someone else is going to take it and then the company won't be making any money.

Tried it, loved it

I just bought a 2-cd Album for $8.99. The process was painless, the files showed up as 320KBPS MP3s, properly tagged and all.

I don't agree with you that they got the pricing wrong - plenty of people are willing to pay the iTunes price for single tracks, and they give a significant (sometimes more than 50%) discount when you buy a whole album. You may not like the whole album as much as individual tracks, so they offer you a discount. You don't HAVE to buy it.

I don't understand why you are unhappy with the price. They're priced competitively with the leader in their market, and offer an ostensibly superior service. That's exactly where their pricing should be. Just because the capacity of an audio/video player exceeds most consumer's ability to fill it with music doesn't mean the price is wrong. By having access to "160 gigs of content" it is irrational to conclude that I should be able to fill that content for a meager sum. That's what, about 100 days of music? You really think you should be able to inexpensively purchase 100 days of music? Really?

Re:

I agree that the rock star has more ways to make money now. I don't think that can translate out to all rock artists.

Actually, I'd disagree. I think the superstar is likely to make a bit less money... but that the average every day musician has a much better chance of making money. He can now create, produce, promote and sell at a much cheaper rate.

It used to be you were either a star or a starving musician. New systems, business models and tools has opened up a wide set of opportunities in the middle for a MUCH larger set of musicians who can now make a decent living, rather than just waiting tables.

I get where you're coming from on the pricing being "wrong" - we've read enough of your economic analysis of scarcity pricing to get it, but given where the labels are on this, how far down can Amazon really go? They're not Apple, who make money on hardware, so they need to turn a little profit on the songs, and the amount they have to pay the labels probably eats up a very large part of that 89 cents. The same holds true for the selection. Until the labels come around and offer DRM-free tracks for low prices, your criticism of Amazon seems misplaced. Or maybe you think they shouldn't even try until the labels come around.

I dont getit...

Although ive been a long time iTunes store user (I dont believe in downloading music from torrents and such), I dont get the point here too. I think Amazon indeed is doing the right thing and I dont see how they can make it any cheaper.

If the idea is to make prices so cheap that people dont have to go to the torrent sites, then that will never happen. On the other side, like others states and I agree with this notion, there has to be some form of profit here. Yes there is the business model to sell at a loss or even (a la iTunes) to pull customers into your other money making products (iPod) but that does not work in all situations and again, to what end. People will always complain that it should be cheaper.

Simplicity fails the simple minded yet again....

The idea behind charging less than $1 per song is to create more business and revenue, if I knew I could get songs for .10c each I'd probably buy a thousand songs, as it would only cost me $100. Currently if I want 1,000 songs I have to shell out $1,000. So as it stands I know that I wish to acquire a certain amount of goods, and as a consumer I'm going to take the path of greatest ease and lowest expense. That path being downloading them, for free, at no cost. I'd be more than happy to pay $100, as that's the budget I've alloted myself, but rest assured I'm not going to spend another $900 to get the rest of goods. By making the songs a lot cheeper you will get more people to buy them, more awareness will be generated for the artists, and more and more buisness will come in, it's really that simple.

The majoirty of us "Free-loaders" are actualy willing to spend money, and if the price is right we'll go ahead and purchase it. If I knew I could go to website.com and get an album for a buck with no hassle of having to fish through site after site supported by a milliion popups of enlargment, credit, or porn offers to hopefully get a semi-decent audio quality rip, then the $1 an album site is going to get my buisness, and odds are I'm gonna fish around and see what else I can get for $1. Then upon realizing that every album I could ever want only costs me $1, and the quality is going to be good, and DRM free, so I can use it in any fashion I want, then I'll spend $100 for 1000 songs everytime I get the chance, because it's simple and cost effective.

I for one will probably never actualy pay for music, aside from buying directly from the artists. I know how to protect myself when downloading songs and the like, but the majority of people out there don't. What they want is a safe secure hassle free way to obtain their goods, right now some poeople think $1 a song is reasonable, and a lot of people don't. Drop the price to .10c a song and everyone will find it reasonable, and odds are more than likely that they'll pay for them, again, and again, and again.

Re: Simplicity fails the simple minded yet again..

Again, we have the user who decides that if they don't provide content at the price point that HE thinks is reasonable then he's entitled to it anyway. I wish I had that option with my car, or rent, or cable, or computers, or insurance, or practically any other product or service else worth owning or using. Sure $0.10 isn't too much? How about a nickle? Then you'd have $50 left over for beer or the other recreational drugs that you can't get for free.

Re: Simplicity fails the simple minded yet again..

So you're price point is at 10 cents per song - which is more a reflection of your income and the ease of access you have to alternatives than the market median price. You would really buy a thousand songs at a time for $100?

$0.10/song - that isn't the price point for everyone, and I'm guessing that for more people than you'd guess, the difference between FREE and $0.01 is an impossible chasm. If I have tens of thousands of songs (which, for the sake of argument, lets say I do) - do you really think I'm about to shell out hundreds to thousands of dollars to "legitimize" that collection?

The value comes in making it easier to pay a little than go through the hassle of torrenting a file, hoping its right, checking my AV software to make sure its up to date, watch for honeypots, worry about the impending threat of litigation when my ISP turns my info over to the RIAA, etc, etc.

The question is whether your time is worth it. Honestly? Mine isn't, and I'm paying for the convenience, not the good itself. If you're torrenting/limewire-ing the files, well that's because your time is worth little enough that the opportunity cost of having you track it down yourself is LESS than a dollar (or you grossly underestimate what your time is worth).

So it isn't as "simple" as you think. If it were that "simple" than a "simpleton" like yourself could run an online media empire. Instead, you're a trolling this site.

Re: Re: Simplicity fails the simple minded yet aga

If the difference between free and $0.01 is an impossible chasm like you say than charging $0.99 will do nothing ether except turn off the people that will pay that $0.01.

Let’s look at it this way; witch is better selling 100 songs for $1.00 or 1000 for $0.10? In the end the profit is the same, $100, but in music the more people that hear your music the more are likely to buy more.

It has been said before; illegal file sharing will not be stopped. It can't be. You, yourself said so. The only thing that can be done is to slow it down. That's where lowering the price comes in, or at least offering more for your buck.

10 cents is just an arbitrary number. If a million people are buying songs for $0.99 and 5 people are downloading, than $0.99 is fine. If one thousand people are buying but millions are downloading, than the price is wrong.

this should be applauded...

They have lots of cheap deals on albums...and they are undercutting itunes DRM-free pricing 30-40 cents on singles.

The whole scarcity pricing is BS- there is no scarcity of digital goods within a marketplace. Just because x is more popular than y does not imply that the purchaser of x wants it more than the purchaser of y. In fact, rarity is generally what makes the prices go up, people used to pay more for the obscure hard to find stuff. Real scarcity pricing should be arbitrage across marketplaces- you can charge more for the stuff that your competitors don't sell.

The real question mark is Vivendi Universal- this completely contradicts their previous complaints about Apple.

Re: this should be applauded...

Agreed. And you'll notice their "top 100" albums are cheaper than the obscure ones.

However, this doesn't contradict Universal - their main complaint was that Apple had all the pricing power. They don't anymore, Amazon has some and presumably Universal has some. They've also got a bargaining chip with iTunes (Match the deal there or we'll pull out).

doesn't always work

I tried the service this morning and had to use the Amazon MP3 Download program to purcahse the entire album. The program launched but no download occured. But Amazon did successfully bill me $7 for the album they never delivered.

Re:

160 Gigs

"The songs all cost either $0.99 or $0.89, which is way too expensive in an age where people can carry around iPods with 160 gigs of content."

Of course, that conveniently discounts the fact that those are VIDEO iPods, and video takes up a ton of space. So we're talking about maybe 100 movies, or 200 TV shows. And 200 TV shows works out to be a little over seven seasons / boxed sets at for a grand total of maybe $250. Or $400 at $1.99 each.

And an argument that also ignores the fact that people also use them for backups, carrying their photo libraries of their kids, and the like. So assuming that an 160GB iPod just HAS to be filled with "overpriced" music is... well, we all know what happens when we assume, don't we?

Re: 160 Gigs

Michael, that's a nice hypothesis that not even Steve Jobs would agree with. He himself conceded that the majority of music on an iPod is pirated, and wasn't it only 21 songs per iPod that are actually bought from iTunes? Your example is perfectly plausible, but does not reflect the majority of users.

Re: Re: 160 Gigs

No, he said that the majority of the music did not come from iTunes. Just like the vast majority of all of the music on MY iPod came from ripping the hundred or so CDs in my preexisting music collection.

And only 20GB or so on my 80GB is music. The rest is TV shows, some movies, and about 20GBs worth of audiobooks.

The real problem with pricing is they ignore the time factor. Take my experience as an example.

Two years I was given an Ipod as a company thank-you gift. Up until then I hadn't purchased a CD for about 10 years simply because I couldn't be bothered to make a trip to a music store and I didn't like the idea of dropping $12-15 on a CD that maybe had two tracks on it I liked.

iTunes brought me back into the market because they added value by making purchases easy and convenient. Plus, iTunes stretched my purchasing power because I only bought the tracks I was interested in.

However, iTunes has (and now Amazon), in my opinion, a fatal flaw in it's pricing model. While I am willing to spend $1 for new music I made a conscious decision to not buy my old 'favorites' because I'm not about to drop $1 on a song I've heard on the radio for several years.

I don't mind paying $1 for a current Billboard top 40 song but it is insane to ask me to spend $1 on a song that is 5, 10, 15+ years old.

But, if they priced older tracks cheaper, say .15 - .20 I wouldn't hesitate. I would fill out my library of my old standbys without much thought.

It is crazy the industry doesn't recognize older tracks don't command the same price as a current hit. They discount older, less popular CD's so why not downloads of the same music?

"Again, we have the user who decides that if they don't provide content at the price point that HE thinks is reasonable then he's entitled to it anyway. I wish I had that option with my car, or rent, or cable, or computers, or insurance, or practically any other product or service else worth owning or using. Sure $0.10 isn't too much? How about a nickle? Then you'd have $50 left over for beer or the other recreational drugs that you can't get for free."

Cars are a scarce resource - it takes engineers to design them, physical materials to build them, fuel and ship/truck space to move them to somewhere I can purchase one, etc. Still, it IS a competitive market, and I have several options for getting one cheaper, including just buying one second-hand.

Rent I have some control over. I live NEAR Boston rather than in it, cutting my rent by about 2/3 while making travel take a bit longer.

If I don't feel that my cable company is providing me sufficient service for the price, a number of satellite companies will happily take my business instead. The cable companies know this, and that keeps prices in check.

If I think Dell charges too much to assemble a computer for me, nothing stops me from simply ordering all the parts and building it myself, and indeed that's exactly what I do.

Insurance is somewhat of a weird one, because it's basic a gamble where the company figures out what the average person will need to paid out, then make sure the fee is over that number, but not far enough over that the competition wins. Insurance prices tend to be a reflection of other industries - what does medical treatment cost, what does a mechanic charge to fix your car, etc.

Music doesn't quite fit with the above...

There's no material expense like with the car, beyond a few thousand for the initial studio crew recording the album, something that would amount to less than a penny per buyer o on popular albums, and maybe a nickel for lesser known one.

There's no land shortage like in real estate, so the economic factors of real estate simply don't apply.

There's no cable vs. satellite thing, because the record companies don't own the backbone of the internet, whereas the cable companies actually do have to lay all that cable, control the network, pay the techs to do maintenance and repairs, etc. All of that obviously costs money, so I don't at all mind that I'm paying a fraction of that cost for the service. We've already paid to transmit the music via our ISP - it doesn't cost a record company 1 cent to get those mp3s to me. Sure, there's a server bandwidth cost, but that's paid by the store, not the record company, and on mass scale, comes down to pennies/album... if even that. Shows also cost significant money to make in the form of paying actors, directors, etc, and those costs get passed down the line. I'd love to say the same is true for music, but musicians make almost nothing on album sales, and hope to do well with them only so that people will see them in concert, buy merchandise, etc... where they actually DO make money.

There's no reflected industry like with insurance. CDs are cheaper to manufacture than tapes, and things like that affect prices... or they would, except that few people actually care about getting a hard copy anymore.

So I'm paying 1-5 cents to have the album produced, 1 cent to cover the server's cost of transmitting me the album, and 50 cents at most to the actual band. The record company should not be making as much as the band, but will want a profit... but they'd still make a rather decent one at 40 cents... so we're up to 91-95 cents. Throw in a 30-50% markup so the store makes a decent profit too, and we stop just short of $1.50/album... not $1/song.

I don't care what anybody says. A dollar per song is not an unreasonable amount to pay. Honestly, who in their right mind would carry 160 gigs worth of music around with them? It would take probably months to listen to each and every song one time at that rate. Nobody in their right mind is going to have that much music. And if they are crazy enough to do so, then I think they'll be able to figure out a way to pay for it all.

I think the real problem here is that our culture is way too obsessed with music. Music is great, but the way this DRM war is going, you'd think people would die without their precious MP3s. Amazon is selling DRM-free music at a perfectly acceptable price. The battle is won. Shut up and enjoy it already. What I'd like to know is where is the outrage over the price of 20 oz. bottles of pop heading for $1.50 when it only costs the vendors about a dime or so?

It's all about priorities, people. Music is not a priority. Putting food on the table, keeping a roof overhead, and having clothes to wear come first. Music is entertainment, not a lifestyle, unless you're a musician. Buy your cheap music, sit back, relax, and quit complaining about this that aren't worth complaining about.

I first have to say I have never had an mp3 player or I pod.
I do love music and listen to it in the house or car. When I am outside I like hearing the background noise traffic birds kids whatever. I am new to digital music and such had a bunch of cassette tapes and albums. I use amarok to stream music (must be one to two thousand streams set up there) and can choose music from around the world. I thought that was pretty neat, I don't know how many of you stream the music from the web . I can listen to this for free and don't personally see spending a dollar a song as a deal. I also don't listen to music outside . I do hope that there is more competition though to help all that do buy music.

sell me music please

So... I signed in to Amazon, then tried to buy me some music. I thought, FINALLY, I could buy music online (I am not fond of DRM). But of course I was being foolish, I'm not in the USA so they don't want my money.
Should I just go to a file sharing network? I've avoided that for so long, but if they really just don't want my money?

I just went there, and...big deal. Disappointment. Why, oh why, if they really want to sell music, don't they put EVERYTHING on there?

Most of the artists I searched for (current pop, but all on major labels and not terribly obscure) had either NOTHING, or a crappy best-of collection, or crappier later-career album that nobody wants. I have a huge LP and CD collection and I'd be willing to shell out for some of the more obscure/hard-to-find tracks IF they were available.

What gives? They should have every cut, every alternate take, every unreleased demo, every out-of-print cd, available for sale. They already own the rights to it, most of it was already digitized for a cd release at some point in the last 20 years, so it would cost little to get the files up there.

Like an earlier poster lamented, do they want to sell me music or not? I'm willing to buy, but damn, what a crappy selection. (ITMS isn't any better, btw, but I figured maybe they were trying to IMPROVE on itunes, rather than repeating the same mistakes. 10 cents less for a ton of cut-out bin garbage isn't a deal...)

I Do Not Agree With RJD

There still is a lot of money to be done with being a rock star but you have to be a good or popular rock star in order to achieve it. Keep in mind that we live in a world of piracy. I can download any album I want from torrent sites without paying anything. The lower the prices for legal downloads are the higher the chances that somebody will give extra money to these bands by purchasing some tracks they love, or even an entire album

Pricing is wrong

Cost, anyone with half a clue, realizes that the cost to distribute is significantly less. IE CDs are cheaper then tapes, and electronic distribution is even less the CDs.

Obviously, the cost of the physical medium is removed. As well as the costs associated with that, transportation, layers of quality control, taxes, etc.

But most important is the fact that stocks of a product no longer have to be maintained. So all the enormous cost associated with stocking are gone, since they only have to keep a single copy of the source. If your still confused, I would suggest reading about why books go out of print.

THE PRICING REVOLUTION ALREADY CAME & WENT

It was called "allofmp3.com" aka "mp3sparks.com". I find myself spending a *lot* more than I planned or would normally spend on those mp3s than DRM-crippled iTunes tracks at a buck-a-pop -- not to mention iPods are cheap junk -- get a gigabeat ;)

It's possible that Mike is right that the pricing is still wrong," but it is definitely not true that the field "is still open for those who now want to attack the achilles heel of both Amazon and Apple." There's no opening unless the record labels and artists decide to create an opening. As long as labels and artists continue to price songs as they do now, no retailer is going to be able to find an achilles heel to attack - at least not legally.

Amazon music download problems

"Still has some problems" is an understatement. I just tried Amazon's MP3 site for the first time, and have been ripped off of $4.65 and about two hours of my life trying to get the *&(*& file to open, load into Itunes, or do anything at all. It seems that the file downloaded before their downloader program did, and now I'm screwed because it won't let me download it again. Only their downloader can do anything with their proprietary .amz format files, and then only during the actual download process. Even the cheesiest freebie music download service does a better job than this.

Amazon music - not ready for prime time

I agree 100% with Sane Scientist. They are not ready for prime time. I should have checked it out before spending my money. I ordered two CDs. They wanted me to install their downloader program. I did, but nothing got downloaded and then the CDs were marked as 'already downloaded'. I just wrote them to ask for my money back.
I think Amazon is a reputable company and their service is always good - but - I will not go there for another mp3 download. Either I buy CDs the old fashion way or stay with itune.